How does a circular economy business model work?

2.5bn tonnes of waste is produced in the EU each year. This is an outcome of our linear economic model, where products are made, used and thrown away.

Circular economy is a model that could offer a more sustainable alternative. Join us as we cover the basics of circular economy theory, meet one LAMA user who is leading a successful business built for circularity, and highlight some ways for businesses and entrepreneurs to engage with this important subject.

What does circular economy mean?  

Although the term ‘circular economy’ is widely used, it is not yet clearly defined.

The Dutch organisation Circle Economy has created a comprehensive definition of circular economy that brings together the language used by NGOs, government agencies, academics and other key players to talk about the topic. This identifies 7 key elements of circular economy:

  • Prioritise regenerative resources
  • Design for the future
  • Preserve and extend what’s already made
  • Rethink the business model
  • Incorporate digital technology
  • Use waste as a resource
  • Collaborate to create value

We believe the sixth bullet point, use waste as a resource, is especially important. It gives the model its circularity, as waste materials are recycled as useful materials in a new production process.

This CNBC video does a great job of concisely explaining circular economy:

What is the business case for a circular economy model?

For some companies, reducing waste and the environmental harm it causes is a good enough reason to adopt a business model that prioritises circularity.

This could be due to the morality of the leadership team and owners, or it could be customer-driven.  A Nielsen report published October 16th 2018, “Sustainability Sells: Linking Sustainability Claims to Sales”, concludes that customers now prefer sustainable brands. Per the report:

“Brands that are able to strategically connect [sustainability] to actual behavior are in a good place to capitalize on increased consumer expectation and demand.”

The other side to the business case for circularity is making smarter use of resources, and designing more efficient production processes.

We can see one good example in the work of Olleco, a renewable energy company based in Northampton, England. Olleco collects cooking oils, fats and food waste from catering and hospitality businesses, and converts those materials into biodiesel for powering heavy vehicles, such as the fleets used to deliver ingredients to Olleco’s clients.

This is one of the many examples of how “waste” products can build capital as part of a circular economy, rather than reducing capital by getting dumped out of the production cycle.

What does a business fit for the circular economy look like?

There are lots of ways a business can play into a circular economy. These include:

Businesses can have different degrees of circularity, from those that do their part by using some recycled materials, to those that only use recyclable materials, and only create reusable products and by-products.

One business which is fully embracing circularity is Filabot. Their equipment enables clients to cost-effectively extract custom filaments from 3D printer waste and turn them into new material.

We interviewed Filabot’s founder, Tyler McNaney, via LAMA app in 2018.

McNaney’s work has earned him a place in the Forbes 30 Under 30 (read more about former Forbes honourees in our article on the 30 Under 30 Class of 2012).

“It’s really been the team and us all working together to build the products and the systems that are needed in the world,” McNaney told LAMA app.

“As we move forward, I think [the award] will be a great foot in the door to companies that need help recycling plastic.”

Filabot’s tech has been used by NASA, Apple, Google and MIT Lincoln Laboratory.

Help for businesses wanting to go circular

As Filabot’s story shows, creating a business geared towards circularity can bring commercial success and personal acclaim.

More importantly, every time a business implements a model suited to a circular economy, that brings humanity a step closer to sustainability.

We recommend visiting the Ellen MacArthur Foundation website for help and advice on circular economy.

You should also check out the European Union’s European Circular Economy Stakeholder Platform, which lists events on the subject of circular economy.

Main image by Bas Emmen on Unsplash.

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